Italy’s biggest bank Intesa Sanpaolo launched a 31 billion euro ($35 billion) bid for Monte dei Paschi (MPS) on Monday, prompting a push for the bank merger by Banco BPM announced just a day earlier.
The offer kicks off a new round of consolidation in the country’s banking sector, as firms look to grow to compete on a European scale.
MPS itself became the third largest bank in Italy just last year with the acquisition of Mediobanca.
Intesa said its offer would create the second-largest bank in the eurozone by market value, behind Banco Santander, with a network of 3,000 branches.
Chief Executive Carlo Messina called it a “risk-free” move during a conference call with reporters, saying it will “strengthen our leadership position in Italy, especially in its richest regions” such as Lombardy and Tuscany.
Intesa also plans to significantly increase its position in asset management for high net worth clients internationally through the Mediobanca network.
“The financial and banking sector, both at the Italian and European level, requires a consolidation process that creates large-scale projects capable of supporting the necessary investments,” Intesa said in a statement.
Larger groups can “compete with new players and maintain appropriate levels of profitability in an increasingly integrated market,” he added.
Investors welcomed what could prove a bidding war for MPS, whose shares rose nearly 13 percent in afternoon trading on Monday.
Intesa shares fell two percent, while Banco BPM shares rose around one percent.
Analysts at investment bank Equita welcomed Intesa’s offer as “a logical move to further strengthen Intesa’s leadership in Italy, not only through the additional development of the banking channel, but also by becoming the leading consumer credit operator in Italy”.
Intesa is offering 16 shares for every 10 MPS shares as well as one euro in cash per share, representing a 12.5 percent premium to MPS’s closing share price on Friday.
Messina said he did not intend to raise the offer, saying it gives MPS shareholders “a significant bonus for a bank that is undergoing a transformation but with weaknesses”.
A deal would boost the combined group’s net profit to over 16 billion euros by 2029, compared with 9.3 billion euros for Intesa last year.
Intesa has been kept out of the banking sector’s wave of mergers and acquisitions in recent years, citing competition issues.
In a bid to win antitrust approval, Intesa said it had already reached an agreement with Italian insurer Unipol to sell it about half of MPS’ branches and its Siena headquarters after its bid was successful.
The extraordinary general meeting of Intesa’s shareholders is scheduled for September 10.
Banco BPM said on Sunday that its tie-up with MPS would create a company worth “more than 50 billion euros” that would constitute “a new national champion”.
But Messina dismissed BPM’s offer as “more of a declaration of love than an offer”.
“We’ve been working on this transaction for a long time,” he said on the call. “By sending this letter, they probably wanted to get ahead.”
Monte dei Paschi, the world’s oldest bank still in operation, was rescued by the Italian state in 2017 and re-privatized in 2023.
